To compete with global oil biggies like BP and Chevron, the government has said that it was planning to merge some 13 state oil firms to create an energy behemoth.

In his fourth Budget speech yesterday, Finance Minister Arun Jaitley proposed to ‘create an integrated public sector oil major which will be able to match the performance of international and domestic private sector oil and gas companies’.

This comes more than 12 years after a proposal to merge oil PSUs was first mooted by the then Oil Minister Mani Shankar Aiyar.

It the proposal is successfully executed, it will help the country to bag larger share of global energy to meet the needs. India is the world's third largest oil consumer.

An idea was mooted a few months back to merge them to create a behemoth that can’t just compete globally but also withstand oil price volatility by using profits the refining business make in low oil prices to make up for losses in upstream and vice versa.

Top eight listed state-owned oil and gas companies have a combined market capitalisation of about USD 80 billion (over Rs 5.4 lakh crore), making it ninth largest globally. The combined entity will be larger than Rosneft of Russia and billionaire Mukesh Ambani-led Reliance Industries. News agency PTI reported that the merge could top USD 100 billion (over Rs 6.7 lakh crore) in market value and compete with global oil biggies.

In 2015-16, all state oil firms together reported a profit of Rs 45,500 crore on revenues of Rs 9,32,000 crore. They had planned a capital expenditure of Rs 87,600 crore in the current fiscal.

"We seek opportunities to strengthen our central public- sector enterprises through consolidation, mergers and acquisitions. It will give them the capacity to bear high risk, avail economies of scale, take higher investment decision and create more value for stakeholders," Jaitley told Lok Sabha while presenting the budget for the year beginning April 1.

Aiyar had first mooted merger of HPCL and BPCL with ONGC and OIL with IOC to create two oil giants having interests across the energy chain in 2004.

However in September 2015, a high-level panel on recast of public sector oil firms did not favour mergers to create behemoths and instead suggested greater autonomy by transferring government shareholding in oil PSUs to a professionally managed trust.

The Advisory Committee on Synergy in Energy headed by V Krishnamurthy was of the view that mergers and consolidations worldwide occurred during times of low oil prices and were instruments of eliminating excess workforce and duplicate facilities.

That was the time when oil prices were on the rise but they have in the last two years dipped to multi-year lows.

Aiyar had also wanted subsidiaries of oil PSUs to be merged with the parent firm - like merger of Kochi refinery with BPCL and Chennai refinery with IOC.

Oil and Natural Gas Corp (ONGC) is India's biggest oil and gas producer and the highest profit making company. Indian Oil Corp (IOC) is the country's biggest refinery while GAIL is India's largest gas pipeline operator.